2012-11-06

LANXESS confirms FY guidance amid challenging environment

  • Q3 sales EUR 2.2 billion, down 8% yr-on-yr
  • Q3 EBITDA pre EUR 255 million, down 18%
  • FY outlook: EBITDA pre growth expected at lower end of guided 5-10% range
  • Focus on flexible asset management and strict cost discipline

Leverkusen/Shanghai – LANXESS is confirming its full-year 2012 guidance despite the challenging business environment. The specialty chemicals company expects full-year EBITDA pre exceptionals growth to be at the lower end of the 5-10 percent range previously guided.

 

LANXESS profited in the third quarter from ongoing strong demand for agrochemicals. This, however, did not completely offset weakening demand in the tire and automotive industries.

 

Group sales declined by 8 percent year-on-year to EUR 2.2 billion due to lower volumes and raw material-driven price decreases. Positive currency and portfolio effects could only partially offset this decline.

 

EBITDA pre exceptionals decreased by 18 percent year-on-year to EUR 255 million in the third quarter due to lower volumes, expenses for scheduled plant maintenance and resulting idle costs. The EBITDA margin pre exceptionals fell to 11.8 percent in the third quarter from 13.3 percent a year earlier and the net profit decreased by 39 percent year-on-year to EUR 94 million mainly due to lower volumes and a lower financial result.

 

“The third quarter result is in line with our expectations and is, at the same time, being compared to a very strong quarter a year earlier,” said Axel C. Heitmann, Chairman of the Board of Management of LANXESS AG. “We are reacting to tougher conditions by implementing our proven counter measures such as flexible asset management and strict cost discipline.”

 

Net financial debt at the end of the third quarter was roughly EUR 1.6 billion, down 8 percent from the second quarter of 2012 due to a reduction in working capital. Operating cash-flow more than doubled year-on-year to EUR 344 million also due to the reduction in working capital.

 

Performance by region

Sales in Asia-Pacific fell by 5 percent year-on-year to EUR 493 million in the third quarter and represented 23 percent of Group sales. This development was mainly due to a business decline in Greater China.

 

Sales in the BRICS countries (Brazil, Russia, India, China, South Africa) fell 18 percent year-on-year to EUR 485 million. These markets represented 23 percent of Group sales.

 

Performance in China

LANXESS Greater China reported sales at EUR 214 million for the third quarter, dropping by 18 percent from a year earlier.

 

“Demand from the Chinese automotive industry is softening currently. Also, we see destocking effects in other target industries,” said Martin Kraemer, CEO of LANXESS Greater China. “As an expert in synthetic rubbers and specialty chemicals, we will continue to provide high quality products to local customers.”

 

For the first nine months, the Greater China region saw sales increase by 9 percent to EUR 777 million.

 

LANXESS has a firm commitment to China and keeps investing in the local market. In September, LANXESS broke ground for the world’s largest plant for EPDM synthetic rubber in Changzhou, marking the largest investment the company has made in China to date at EUR 235 million. Also in Changzhou, LANXESS’ largest leather chemicals plant in China will come on stream in the first half of 2013, with an initial capacity of 50,000 metric tons per year.

 

Performance by segment

Sales in the Performance Polymers segment were 17 percent year-on-year lower at EUR 1.2 billion. Selling prices declined by 12 percent year-on-year due to falling raw material prices, above all butadiene, while volumes fell by 11 percent. EBITDA pre exceptionals decreased 29 percent to EUR 152 million in the third quarter due to lower volumes in the replacement and OEM tire markets. Expenses for scheduled maintenance and resulting idle costs also burdened earnings.

 

In contrast to standard-grade synthetic rubbers, demand for high-performance rubbers such as neodymium-based performance butadiene rubber (Nd-PBR) and solution styrene butadiene rubber (SSBR) remained resilient. These rubbers are essential in producing “Green Tires” that reduce fuel consumption and help to reduce CO2 emissions.

 

November 1 saw the launch of mandatory tire labeling in the European Union (EU). Tires will be graded from A to G according to their fuel efficiency and wet grip. Rolling noise is also measured. The new legislation provides more transparency for consumers by highlighting the added value of “Green Tires”. Tire labeling will also come into force on December 1, 2012, in South Korea.

 

Third quarter sales in the Advanced Intermediates segment rose 9 percent year-on-year to EUR 403 million, driven by higher selling prices, positive volumes and currency effects. EBITDA pre exceptionals rose 10 percent year-on-year to EUR 75 million, with both business units Advanced Industrial Intermediates and Saltigo profiting from the ongoing robust demand from the agrochemicals sector.

 

Sales of the Performance Chemicals segment rose 6 percent year-on-year to EUR 555 million in the third quarter due to positive currency effects and portfolio changes resulting from three recent acquisitions in the USA. EBITDA pre exceptionals remained unchanged at EUR 75 million in the third quarter. Inorganic Pigments saw business improve in the Asian construction industry. Rubber Chemicals and Rhein Chemie saw volumes decline from their customers in the automotive industry.

 

Outlook

LANXESS expects that the economic environment will not worsen further in the fourth quarter. Therefore, the company expects full-year EBITDA pre exceptionals growth to be at the lower end of the 5-10 percent range previously guided. The company achieved EBITDA pre exceptionals of EUR 1,146 million in 2011.

 

For the fourth quarter LANXESS expects the automotive sector in Europe to remain weak, while growth in North America and China will continue, albeit at a slower rate. Demand from the tire industry will continue to remain weak, while agrochemicals will continue to show a stable performance. The construction industry in Europe will see no improvement but will show a slight recovery in North America. LANXESS will adhere to its “price-before-volume” strategy. Raw material and energy prices are expected to remain stable in the fourth quarter.

 

“Despite the current macroeconomic situation, the long-term growth drivers for our business remain intact. With our technology-based products, we will continue to capitalize on the megatrends and focus on the growth regions,” said Heitmann.

 

Q3 2012 Key Data
(EUR million)

 

Q3 2012

Q3 2011

Change %

Sales

2,159

2,336

(7.6)

EBITDA pre exceptionals

255

311

(18.0)

EBITDA margin pre exceptionals (percent)

 

11.8

13.3

 

Net income

94

154

(39.0)

Earnings per share (€)

1.13

1.85

(39.0)

LANXESS is a leading specialty chemicals company with sales of EUR 8.8 billion in 2011 and currently around 17,100 employees in 31 countries. The company is at present represented at 49 production sites worldwide. The core business of LANXESS is the development, manufacturing and marketing of plastics, rubber, intermediates and specialty chemicals. LANXESS is a member of the leading sustainable indices Dow Jones Sustainability Index (DJSI) World and FTSE4Good.


Forward-Looking Statements
This news release may contain forward-looking statements based on current assumptions and forecasts made by LANXESS AG management. Various known and unknown risks, uncertainties and other factors could lead to material differences between the actual future results, financial situation, development or performance of the company and the estimates given here. The company assumes no liability whatsoever to update these forward-looking statements or to confirm them to future events or developments.

 

Information for editors:

All LANXESS news releases and accompanying photo, video and audio material can be found at http://www.lanxess.cn or http://www.weibo.com/lanxess.

 

Information on chemical products from LANXESS can also be found in our Web Magazine at http://webmagazine.lanxess.cn.